Federal Reserve raises interest rates by 25 basis points to highest level since 2007

Federal Reserve reporter Jennifer Schonberger breaks down the Fed's January policy statement on the central bank's interest rate hike and easing inflation.

Video transcript

JENNIFER SCHONBERGER: Good afternoon. Rate hike, the Federal Reserve raising its benchmark policy rate by a quarter percentage point to a new range of 4 and 1/2% to 4 and 3/4%. That marks the highest level since October 2007. Now, in their statement, Fed officials acknowledged that inflation has eased somewhat, but remains elevated. They no longer noted, however, that the war in Ukraine is contributing upward pressure to inflation-- rather, just global uncertainty.

Now they did maintain language in this statement that, quote, "ongoing increases" in rate hikes would be appropriate to obtain a, quote, "sufficiently restrictive" level on the Fed funds rate, perhaps, in effect, countering that recent easing in financial conditions. Now, the Fed also noted that in determining the, quote, "the extent of future rate hikes," instead of pace, which was formally used in the former statement, that the Fed will take into account lags in monetary policy and the impact on inflation, the economy, and financial developments.

Of course, this move marking a further slowdown from the 50 basis point rate hike we saw in December and a further slowdown from a string of four 75 basis point rate hikes in June through November of last year, which was the most aggressive stretch since the 1980s. This decision was unanimous. We will get more from Fed Chair Powell when he holds its press conference in less than 30 minutes' time. Back to you.

SEANA SMITH: All right, Jen, when we take a look at this, you mentioned the fact that ongoing rate increases, they remain appropriate. Inflation, though, has eased somewhat. We know a lot of the focus is going to be on Powell, what he says, the tone that he is using. What will you be looking to hear from Powell in just about 30 minutes from now?

JENNIFER SCHONBERGER: I expect that Chair Powell to take a very hawkish tone. He is going to remain committed to bringing down inflation to 2%. While it has eased over the past three months, it still remains well above the Fed's 2% target. If you look at the Fed's preferred measure on inflation, that so-called core PCE clocked in around 4.4% in December. So still somewhat elevated there.

So I expect him to talk tough on inflation, and especially if financial conditions remain easy or ease further, I think that could give the license, the Fed license to continue raising at that point. And that's why I think you saw the Fed maintain language for ongoing increases, plural.

SEANA SMITH: All right, Jen Schonberger, thanks so much.